Anupam Rasayan India's (NSE:ANURAS) Returns On Capital Are Heading Higher

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Anupam Rasayan India (NSE:ANURAS) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Anupam Rasayan India, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.12 = ₹3.6b ÷ (₹38b - ₹8.1b) (Based on the trailing twelve months to March 2023).

Thus, Anupam Rasayan India has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Chemicals industry average of 15%.

See our latest analysis for Anupam Rasayan India

In the above chart we have measured Anupam Rasayan India's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

SWOT Analysis for Anupam Rasayan India

So How Is Anupam Rasayan India's ROCE Trending?

Anupam Rasayan India is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 303%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Anupam Rasayan India's ROCE

All in all, it's terrific to see that Anupam Rasayan India is reaping the rewards from prior investments and is growing its capital base. And with a respectable 69% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Anupam Rasayan India can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Anupam Rasayan India that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.